DIB's Dh5.1bn rights issue three-times subscribed on foreign demand

The UAE’s biggest sharia-compliant lender received subscriptions in excess of Dh14bn

Dubai Islamic Bank second-quarter profit rises 14 per cent to Dh1.21bn. Courtesy Dubai Islamic Bank

Dubai Islamic Bank, the UAE’s biggest sharia-compliant lender, said on Sunday its Dh5.1 billion rights issue received subscriptions in excess of Dh14bn, with more than half of requests coming from foreign investors.

The bank announced the issuance of 1.6 billion additional shares at price of Dh3.11 per share in April to boost its core capital, it said in an emailed statement. The deal, which closed towards the end of May, is part of the bank’s strategy to preemptively create capacity to support its growth plans in the future.

“Growth remains on the horizon for DIB. This exercise is a strategic move for us,” Adnan Chilwan, the group chief executive said. “The capital boost will help maintain our competitive edge whilst meeting regulatory requirements as we further progress our growth ambitions in the medium term.”

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Moody’s Investors Service last week said the DIB rights issue along with the issuance of $1bn of sukuk in January will ensure stable liquidity levels of above 20 per cent of tangible banking assets over the next 12 to 18 months for the lender.

"The capital increase is credit positive for DIB because it replenishes reserves and enhances loss-absorption buffers .... after high growth during 2013-17," Moody's said in a report released on Thursday.

The deal which has increased total shareholder equity to Dh31.2bn from Dh26.1bn as of March 2018, "will support DIB's liquidity" which had been on the decline since 2013 as a result of higher-than-average-credit growth. Moody’s expects DIB’s credit growth to be 10 to 15 per cent in 2018.

DIB has doubled in size and tripled its profitability in the last four years, Mr Chilwan noted.

“The bank’s financial position has become stronger than ever before with vastly improved asset quality and significantly more robust balance sheet that today offers even more opportunities to grow,” he said.

In April, the bank posted a 16.4 per cent year-on-year jump in first quarter net profit, as revenues climbed on the back of higher income from fees and commission business.

Net income attributable to equity owners surged to Dh1.17bn from Dh1bn reported for the same period in 2017, DIB said in a statement to the Dubai Financial Market at the time. Net revenue for the period amounted to Dh1.97bn, a 9 per cent rise from a year-earlier, supported by 15.5 per cent growth in fees and commissions income, it said.

The results beat five analysts' estimates averaging Dh1.14bn, according to Bloomberg. The first-quarter net income was above SICO Bahrain's forecast by 4 per cent.